May 19, 2006


US Wheat Review on Thursday: Mixed; kansas city board of trade sets 9-Year top on forecast, funds



U.S. wheat futures ended mixed Thursday, with Kansas City Board of Trade hard red winter wheat futures mostly higher after setting a nine-year top on fund buying and worries that hot, dry U.S. Plains weather will further harm the already drought-hit HRW wheat crop, brokers said.


Support was also seen from good global demand amid tightening supplies, as evidenced by talk that Argentina may trim its wheat exports.


Rumors circulated Wednesday that Argentina might limit its wheat exports and Argentine media reported Thursday that the government might limit wheat exports to between 7 million and 8 million tonnes annually.


The U.S. Department of Agriculture has forecast 2006-07 Argentine wheat export sales at 10.5 million tonnes.


Officials at the Argentine's Agriculture Secretariat told Dow Jones Newswires on Wednesday that they knew nothing about such a plan, but the news built on last week's USDA bullish 2006-07 wheat ending stocks data.


Those USDA forecasts pointed to a stocks-to-use ratio of 13 days for U.S. supplies and eight days for global inventories amid lowered production in the U.S, India, Russia and Ukraine, Goldman Sachs noted earlier this week.


"This would bring global inventories to a record low level, and U.S. inventories to their lowest point since the 1996-97 crop year," Goldman analysts said.


U.S. net wheat export sales for the week (old- and new-crop) ended May 11 of 283,300 metric tonnes matched estimates, brokers said Thursday.


Still, U.S. wheat traders noted the speculative commodity funds' importance in U.S. wheat futures lingered.


Last week's total U.S. wheat export sales totaled 10.4 million bushels while funds were estimated to have bought Wednesday 100 million bushels of Chicago Board of Trade wheat and 28 million bushels of KCBT HRW wheat, they noted.


In fact, speculative commodity funds have bought about 50,000 CBOT wheat futures in the four sessions ending Wednesday, boosting CBOT fund length to a net long 49,700 lots, they noted.


Amid the market volatility, the Chicago Board of Trade said late Thursday it had changed its minimum wheat margin requirements from US$743 to US$878 per contract.


The KCBT said late Wednesday it had raised its minimum margin to US$1,250 per contract.


Both the CBOT and the Minneapolis Grain Exchange reported record wheat futures open interest before Thursday's opening bell of 491,322 soft red winter lots and 57,051 hard red spring wheat lots, respectively.


CBOT July wheat settled Thursday down 4 1/2 cents at US$4.18 1/2 after setting a new 3 1/2-year and July-contract high of US$4.27.


The front month's nine-day RSI was 80, above the overbought level of 70.


Speculative funds bought 2,100 CBOT wheat futures on Thursday, brokers said. Rosenthal Collins bought 5,000 July, ABN Amro bought 1,000 July and Tenco Inc. bought 800 July, they said. Man Financial sold 1,100 July.


Midday spot U.S. HRW and SRW Gulf barge bids were unchanged Thursday, cash sources said.


In other U.S. wheat export news, the USDA said Thursday that first-quarter U.S. wheat export inspections at all ports totaled 6.24 million metric tonnes, up 2% from last year. First quarter Pacific Northwest wheat inspections rose 4% from last year, but U.S. Gulf inspections slipped slightly.


In global news, the European Union grain management committee Thursday granted 79,000 metric tonnes of subsidized wheat in its weekly tender Thursday.


Last week the E.U. granted 153,000 tonnes of free-market wheat at a maximum refund of EUR6.20/tonne.


And India's tender to import wheat has failed to get the desired response, with eight bidders offering an aggregate sale of less than then the sought 3.0 million metric tonnes, sources said.


The largest offer was from Australia's AWB Ltd. (AWB.AU), which has offered to sell only 1.2 million tonnes at price of around US$175, free-on-board, an official of State Trading Corp. of India, or STC, told Dow Jones Newswires.


Kansas City Board of Trade


KCBT July wheat ended Thursday down 1/4 cent at US$5.06 1/4 per bushel after setting a new 9-year high of US$5.14. The contract's nine-day RSI was 82.


Spot cash 11% and 12% U.S. hard red wheat basis bids rose 4 cents Thursday, bids for 13% rose 3 cents and 14% HRW bids rose 1 cent, according to the KCBT.



Minneapolis Grain Exchange


MGE July closed down 5 1/4 cents at US$4.73 1/4 after setting a new 3 1/2-year high of US$4.83; its nine-day RSI was 75.


Cash spring wheat basis bids were steady to firm Thursday, cash sources said. Thursday's Minneapolis wheat receipts totaled 21 railcars versus last year's 172 railcars. There were 41 durum receipts versus last year's 36 lots.